The noted economist John Maynard Keynes once said, "The avoidance of taxes is the only intellectual pursuit that carries any reward." He's almost right -- but there's just one thing better: cutting taxes, so that no more avoidance is needed.
That has been Governor Pataki's constant focus every day, and it will remain so as long as he holds public office. Nothing else has greater power to breathe new life into the age-old proposition that America's greatness derives from individual freedom and the ability of men and women to be energetic agents of their own destinies.
As everyone here knows well, taxes and freedom have an inverse relationship -- the more you have of the former, the less you have of the latter. Every dollar that government takes from the person who earned it is an infringement on that person's freedom.
When this country was born, America was rich in freedom -- and the IRS was just a bad dream in a bureaucrat's mind that was more than a century away from reality. But in the last two centuries, we've lost a lot of the freedoms our forefathers fought for.
Ben Franklin once wryly observed that this nation, which fought a revolution against taxation without representation, wasn't "much happier about taxation with representation." That's as it should be. The Governor's goal is to return those lost freedoms, our paychecks, to the people that earned them -- the hard-working men and women of this state, and the employers who create the jobs and products that pay all of our salaries.
That's what good government is all about in the 21st century -- restoring freedom and putting power where power belongs, in the hands of the American people.
But what does that really mean? Is this just a way to put a couple of extra bucks into the taxpayers pockets so they can live it up a bit more on Saturday night? Some skeptics may think so, but they're wrong - it's far more than that.
Real tax relief is about expanding opportunities, unleashing the creative energy of the American spirit and creating new jobs. By cutting the taxes that stifle economic growth, we can make New York more competitive in the global marketplace while creating more jobs with each passing year -- jobs that allow our children to grow up, graduate from college, and raise their families right here in New York State.
And most fundamentally, tax cuts reflect the Governor's belief, that individuals and private businesses will find the most efficient way to use American capital -- not government. An infinite number of government planners could never keep up with the ingenuity of the American economy, if we just give the private sector a fair chance to pursue its own destiny.
President Reagan well understood this crucial fact, and he changed the way Washington saw the private sector. Reflecting on how Washington did business before his election, Reagan once said: "Back then, government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it."
That's how Washington looks at the economy, and for far too long that was how Albany saw things too. And that simple statement expresses, as well as any other, the heart and soul of the conservative philosophy: to replace that "command-and-control" view of the economy with a genuine faith in the power and wisdom of individuals living in a truly free society.
Less social and economic engineering, more tax cuts and regulatory relief, more faith in the power of the private sector to put people to work. It's a simple formula for success, but it requires that politicians, who like to control things, trust the people to control their own destiny. That's what tax cuts are all about, and that's what the Governor has fought for in this year's budget.
NEW TAX CUTS
As you know, the Governor and legislative leaders reached agreement on a new State budget last week, and I'm sure it will surprise no one to hear that his two top priorities in negotiating that budget were tax cuts and debt reform. I'm pleased to say we accomplished a lot on both fronts.
The new budget will provide nearly $1.4 billion in new tax relief, including the elimination of all gross receipts taxes on energy for industrial and business customers -- a key component of the Governor's 21st Century Upstate Economic Agenda and I know one of your top priorities as well.
This move will generate $330 million in annual tax savings statewide and will dramatically improve New York's ability to attract and retain jobs.
When you combine this with the $2.3 billion in tax cuts already taking effect this year -- as well as the numerous tax cuts scheduled to phase-in over the next four years -- the people of New York can look forward to more than $6.8 billion in new tax relief by 2005.
By the end of this fiscal year, we will have provided a cumulative total of more than $40 billion in tax cuts.
When all of these tax cuts are fully implemented, they'll amount to more than $100 billion in tax relief, the largest sustained State tax cutting campaign in American history.
And the results of that are clear for all to see: tax cuts put the wind in the sails of New York's businesses. The largest tax cutting program in our history has already produced more job opportunities than ever before. That's no accident.
Measured against the national average, New York is in the midst of the most significant economic expansion in the last 42 years.
Now, some skeptics think that we've already reaped the benefits of those tax cuts, and now things are leveling off. They couldn't be more wrong: we're building up steam, and the best is yet to come.
Last year, New York's employers created more new jobs than at any time in the last 15 years -- a growth rate of nearly 3 percent. That's upstate, downstate, east, west, you name it. Wherever you look, new jobs are being created in record numbers. Employment within the Adirondack Park is at an all-time high. And more importantly, statewide private sector employment is at an all-time high, and getting better each year.
Now you all know that the real credit for those jobs goes to the employers who created them. But there's no question that the State can do a lot to help -- or hurt -- those employers.
For more than a decade, the State saw New York's business community as the enemy, to be watched over with distrustful eyes. The Governor has looked at things differently, and working together, we've done a lot to renew our economic vitality. We've passed unprecedented tax cuts, reduced outdated and redundant regulations, and reformed the workers' compensation and unemployment insurance systems.
The Governor is proud of that -- but each of you should be too, because he couldn't have done it without your support. And that work is not yet done.
In total, this year's Budget includes more than 30 new tax cuts -- in the interest of saving time, I'll spare you from the full list. But let me mention just a few.
The College Tuition Deduction will save New Yorkers $200 million.
Reducing the "Marriage Penalty" will save New Yorkers another $200 million.
Expanding the Earned Income Tax Credit will save New Yorkers another $125 million.
And New York's businesses will save more than $62 million through a variety of cuts in taxes such as:
- the Small Business tax.
- the S-Corporation Differential tax.
- the Truck Mileage tax.
- the Commercial Heating Oil tax.
- the Telecommunications and Cable Equipment Exemption.
- the Web Hosting Equipment Sales Tax Exemption.
- And the repeal of the Petroleum Business Tax.
- And that's just part of the picture.
FISCAL RESTRAINT
Tax cuts are the core of this year's budget, but there's another crucial element to the fiscal picture that is almost as important to the long-term health of New York's economy, and that's fiscal restraint and debt reform.
We've worked hard to exercise strong fiscal restraint over the past five years, and as a result we've transformed a $5 billion deficit into record surpluses. But the job is not done. We need to keep a tight rein on government spending, and we need to put a firm cap on New York's overall debt load. And this year, we're going to do just that.
KEEPING SPENDING UNDER CONTROL
This year's Budget will total approximately $77.5 billion.
When combined with our past five budgets, our average annual growth in General Fund spending -- the key portion of the budget that is supported by State taxpayers -- will now be just 2.6 percent.
That's less than half of rate at which spending grew under the prior Administration, and nearly three times lower than the national average [7.3 percent] for the other 49 states.
And even looking at All Funds, if you remove the STAR tax cut from the "spending" column -- since it is really a tax cut and not an expense -- New York's average annual growth in total spending since Governor Pataki took office is just 3.4 percent [-- and only 3.8% including STAR].
This too is well below the national average of 5.3 percent growth in All Funds spending for the other 49 states. Under the prior Administration, spending grew at more than twice the current rate -- a whopping 7.3 percent.
In fact, of the ten largest states based on population, New York now ranks first in restraining state General Fund spending growth since 1995 -- more than three times lower than California [8.7 percent], twice as low as Florida [6.3 percent], and nearly twice as low as New Jersey [4.5 percent].
DEBT REFORM
Controlling spending while fueling economic growth are essential components of the Governor's overall effort to get New York's economy back on its feet and its fiscal house in order. In the long run, however, we need to control the State's reliance on debt and this year, we're taking the first truly significant steps forward on that front as well with the landmark Debt Reform Act of 2000.
The Debt Reform Act will dramatically and permanently improve the State's long-term fiscal integrity, save billions of dollars in interest costs for taxpayers, and prevent future generations of New Yorkers from being saddled with an insurmountable burden of debt.
It represents the most sweeping and fundamental debt reform in State history, and will send a loud and clear message to Wall Street rating agencies and financial observers throughout the country that New York has fundamentally changed the way it conducts business.
This historic package of reforms will impose caps on outstanding debt and debt service costs, eliminate the use of debt as a fiscal gimmick by restricting its use to capital purposes only, and reduce the maximum term of debt issuances by 25 percent.
And rest assured -- although I think the Debt Reform Act is the most important immediate action we could take, the Governor is not done yet: He will continue to fight tirelessly for a constitutional amendment to ban back-door borrowing and ensure that these debt reforms are permanently enshrined into the State's most fundamental governing code.
FISCAL RESERVES
And at the same time we're controlling long-term debt, we're also putting even more money into our fiscal reserves, raising them to a total of more than $3 billion -- one of the highest levels in State history. This represents a huge improvement over the $158 million the State held in reserve when Governor Pataki first took office.
POWER FOR JOBS
Now all of you understand well by now that tax cuts and fiscal responsibility are the Governor's chief concerns. But his focus on those hasn't kept him from supporting critical programs to actively promote economic growth in the state, and no initiative on that front is more important than the Power for Jobs program.
I know all of you will be delighted to hear that this year's Budget provides an additional 300 megawatts of low-cost power to businesses across New York through the Power for Jobs program.
This program is another key component of the Governor's 21st Century Upstate Economic Agenda, and it's been very successful at creating jobs by providing low cost power, particularly in upstate communities where high utility rates have long been recognized as a drag on the economy.
In fact, the Power for Jobs program has created or protected more than a quarter million jobs in the last three years, serving as a major economic development tool across the state.
ECONOMIC DEVELOPMENT
In addition, the Budget will provide more than $419 million for economic development programs and job creation initiatives -- an increase of more than $115 million over last year.
Most importantly, it will continue the successful policies we have enacted to re-energize New York State's economy.
Since 1994, more than 675,000 private sector jobs have been created and, in the last two years, more than 1,950 companies have located or expanded operations in New York State. And New York's economy is truly gaining momentum now - we've recovered from the economic decline of the '80s and early '90s, now we're gaining new ground.
STAR REFORMS
One other key aspect of the budget deserves mention, since the high cost of local property taxes has a significant effect on the overall business climate in the state, and that's the STAR program. In this year's Budget, the STAR tax cut will grow by $800 million -- from $1.2 billion to $2 billion.
The Budget also includes new proposals that will build on last year's package of school budget voting and contingency reforms that have given local voters a greater say in local education spending decisions -- while also further controlling spending growth.
These new reforms will provide additional information to school voters on how school budgets and tax levies will affect STAR savings and how proposed school budgets compare to the maximum contingency budget allowed in each district.
These additional provisions will ensure that the tax cutting benefits of the STAR program are not eroded by irresponsible spending at the local school district level.
CONCLUSION
Putting more money in the hands of taxpayers and local property owners; more money into our fiscal reserves, controlling spending, capping debt, and reducing the high cost of power for industrial users -- what do these initiatives all have in common?
It's the Governor's single-minded focus on restoring power and opportunity to the citizens and businesses of New York, because the Governor knows that you are the real engines of opportunity for New Yorkers -- he can cut taxes, fight crime, and reduce regulations, but only you can give every New Yorker the key to the American dream -- a good job that will pay the mortgage on a family home, tuition for the kids' college education, and a retirement income that allows New Yorkers to live out their lives in dignity.
Our job is to get government out of the way, so that each of you can do your job.
Thank you very much.
Speech by Acting State Budget Director Carol E. Stone
Delivered Monday, May 8, 2000
Business Council Annual Dinner